Pacific Investment Management Co., the Allianz SE fund unit overseen by Mohamed El-Erian and Bill Gross, took in more money than any asset-management firm during the third quarter, with more than $56 billion in deposits.
Allianz, Europe's biggest insurer, said today its bond- management unit's operating profit rose 44 percent in the quarter from a year earlier to 432 million euros ($593 million). Pimco, with about $1.2 trillion in assets, accounts for almost the entire fixed-income business at Munich-based Allianz, which said the pace of new cash won't continue if interest rates rise.
Pimco, best known for the bond funds it has run since 1974, has attracted money as investors flock to top-performing fixed- income managers in the wake of stock market swings and the global financial crisis. BlackRock, the world's biggest asset manager, last month said it drew $15.6 billion in deposits. Pimco's pace of deposits may be hard to sustain if investor preferences change, said Oliver Baete, Allianz's chief financial officer.
“I think we had more net inflows into Pimco than we had flows in the U.S. equity asset-management industry in all of this year,” Baete said today in a conference call with investors. “It's due to the huge success of our friends at Pimco that have just relentlessly focused on performance, now obviously having a lot of support from the market as interest rates are at the lowest point that I can imagine.”
Gross's $256 billion Pimco Total Return Fund, the world's biggest mutual fund, averaged gains of 8.9 percent in the past five years, beating 98 percent of rivals, according to data compiled by Bloomberg. The portion of Allianz bond assets outperforming rivals rose to 91 percent as of Sept. 30 from 79 percent a year earlier, the firm said today.
Allianz reported fixed-income deposits of 127 billion euros in the 12 months ended Sept. 30. Its third-quarter deposits climbed 19 percent from the same period in 2009.
Baete said investors may turn away from fixed-income funds and move to equities if interest rates increase from the near- zero levels that they've been at for the past two years. The deposits into bond funds are “probably not sustainable and we are seeing the buildup of a new bubble,” Baete said.
In a July 28 interview with Tom Keene on Bloomberg Radio's “On the Economy,” Gross said Pimco had been attracting almost $1 billion a week from investors.
Under Chief Executive Officer El-Erian, Pimco last year began a push into equities as it looks to diversify beyond its mainstay of bonds. The firm has hired portfolio managers from Franklin Resources Inc. and
Goldman Sachs Group Inc.'s asset- management unit to open global equity funds.
